from the IRS-Criminal-Investigations:-A-Cash-Only-Business dept
The IRS's Inspector General has confirmed what many of its victims have known all along: the Criminal Investigations' asset forfeiture program isn't really for "disrupting criminal enterprises." It's for taking money from innocent people.
The Treasury Inspector General for the Tax Administration (TIGTA) took a look at forfeitures tied to the IRS's so-called "structuring" cases. If you deposit more than $10,000 into a bank account, the IRS is notified and you, the depositor, have extra paperwork to fill out. This fulfills IRS reporting requirements and is generally a headache for the depositor and the bank.
If you deposit less than $10,000 in cash, it's perfectly legal. Do it often enough and the IRS starts to believe your cash deposits are the product of criminal activity. Even if you never have enough on hand to clear the $10,000 mark with a single deposit, a string of smaller deposits makes the
IRS suspicious IRS's eyeballs turn into dollar signs.
The IRS is allowed to investigate suspected structuring. The problem is, the IRS has very little interest in investigations. It likes taking money from people's bank accounts, but has no stomach for the rest of the legwork. The IRS IG pulled a random selection of structuring cases and discovered a large majority of them had no business being called "cases." In 9 out of 10 "cases," there was no illegal activity discovered. [TIGTA Report PDF]
In 26 (9 percent) of the 278 structuring cases, we were able to establish that the funds came from a Title 18 illegal source or involved any other illegal activity. In the other 252 (91 percent) of the 278 cases, we did not find evidence that the structured funds came from an illegal source or involved any other illegal activity. Businesses that deal with currency transactions (retail, wholesale, service, automobile, restaurant, gas station, etc.) were primarily (210 of the 252 legal source cases) affected by the structuring seizures.
The IRS was able to get away with this for so long because it moved fast. It processed seizures quickly and pressured asset owners into taking settlements, rather than risk turning easy money into trickier criminal prosecutions where actual evidence might be needed.
All told, the IRS took more than $17 million away from US citizens without ever establishing the funds were the result of criminal activity or the asset owners were engaged in structuring. And that's just in the ~300 cases sampled for the TIGTA report.
The report also notes the streamlined stripping of money comes bundled with the streamlined stripping of rights. It's even worse with the IRS than it is with regular law enforcement, where assets are presumed "guilty" and it's up to owners to prove the innocence of property no longer in their possession. While it's understandable the IRS would find advance warning an impediment to its forfeiture efforts, the lack of investigation beforehand means the agency's seizure warrants were likely seriously deficient.
Interviews were conducted only after the seizure warrant was signed by a judge and the property was seized; therefore, judges did not possess information from interviews with the property owner when making their probable cause determination. This could have provided the judge with a possible explanation for the banking transactions to consider before signing the seizure warrant. We are not suggesting that CI should always conduct interviews of subjects prior to obtaining a seizure warrant. In fact, CI indicated that seizures are often conducted before the interview to protect the interest of the Government by ensuring that the assets are not moved. However, when 91 percent of the property owners are not believed to be conducting any illegal activities (other than structuring), conducting the interviews after the seizure leaves judges without relevant information about what subjects knew about CTRs and what their intent was behind their currency transaction patterns...
In IRS seizures, the money is taken first. Any investigation follows after accounts are frozen or drained. Once owners are finally made aware of the situation, the CI division does what it can to ensure the IRS maintains control of the seized assets. The Inspector General found IRS agents aren't apprising citizens of their rights and remedies.
For 106 of 229 cases, the agents did not state the purpose of the interview or we did not find evidence they did. IRM procedures in Title 26 cases require special agents to advise the property owner regarding the purpose of the contact. For 62 cases, the special agents did not identify the purpose of the contact, and for 44 cases, the interview does not document whether the special agent explained the purpose of the interview to the property owner…
For 181 of 229 cases, we identified a problem with the information provided to the property owner about the seizure. In 110 cases, the property owners were not informed until the end of the interview that a seizure took place. In 60 cases, the property owners were not informed that a seizure took place, and in 11 cases we could not determine if the property owner was informed that their funds had been seized.
In only five of 229 interviews were property owners provided the noncustodial advice of rights prior to the interview.
This extreme indifference towards citizens and their rights and property inevitably leads to this sort of thing:
In the one case we can discuss publicly, the property owner alleged that special agents and local police arrived at the property owner’s place of business and used police search dogs in the search. The entrance and exit to the store were allegedly blocked, and it was alleged that the taxpayer was asked to answer questions. The property owner, who spoke limited English, was told that his account was seized, and he was presented with a Consent to Forfeiture to sign. He alleged that officers spoke in loud tones at him instructing him that he should sign.
Someone put money in the bank the wrong way... and they're met with police dogs, yelling, and borderline coercion. But I guess that's what's needed to get "criminals" to cooperate. Oh wait.
After the Institute for Justice was retained to represent the property owner, all of his funds were returned.
All of this leads to the following: the IRS's investigatory arm isn't in the "criminal disruption" business, but rather the simpler, more profitable forfeiture business.
Outcomes across the CI Asset Seizure and Forfeiture Program did not appear to be consistently determined by the facts of the cases but rather by property owners’ risk tolerance to the high costs of litigation...
If there's any good news to be had, it's that the IRS is (mostly) no longer pursuing alleged structuring cases if the deposited money appears to have come from a legitimate source. That was put into place after a couple of very uncomfortable Congressional hearings back in 2014. TIGTA says, for the most part, the IRS is following the new guideline. However, it still found five cases where the new rule appears to have been ignored and notes the IRS has still granted itself a sizable loophole to exploit.
Under the change in policy, CI will no longer pursue legal source structuring cases unless exceptional circumstances justify the seizure and the seizure is approved by the appropriate CI executive. CI has not yet defined what circumstances rise to the level of “exceptional.”
The other good news is that enough pressure -- applied by citizens and their representatives -- can get the government to severely scale back a program that brought in lots of easy money.